M/S.Man Power Servicing Agencies vs. Union Of INDIA

Held

The Court held that the cancellation of the petitioner's L1 tender by the respondents on the ground that the petitioner is a defaulter in payment of a huge amount of tax was not valid. The Court noted that the tax liability of the petitioner was sub judice before various authorities and tribunals, and until these disputes were resolved in favor of the department, the petitioner could not be termed a defaulter. The Court also referred to various satisfactory-cum-work experience certificates submitted by the petitioner, which indicated satisfactory performance and timely payment of taxes and salaries. Consequently, the Court found that the fresh tender notification issued on April 26, 2019, was also not sustainable. The Court allowed the writ petition and directed respondents 3 and 4 to award the work order to the petitioner within two weeks, considering their representation dated May 8, 2019.

Facts

The petitioner, a service provider, participated in a tender notification dated March 7, 2019, issued by the Commissioner of Central Taxes, CGST, Guntur Commissionerate, for providing housekeeping services. The petitioner emerged as the L1 bidder. However, by a letter dated April 26, 2019, the Joint Commissioner cancelled the tender, stating that the petitioner was a defaulter of a huge service tax amount. Subsequently, a fresh tender notification was issued on the same date. The petitioner filed a writ petition challenging the cancellation proceedings and the fresh tender notification. The petitioner contended that their tax liability was sub judice before various authorities and tribunals, and they could not be termed a defaulter until such proceedings attained finality. The respondents relied on a clause in the tender notification reserving the right to cancel tenders.

Key Issues

1. Whether the cancellation of the petitioner's L1 tender by the respondents on the ground that the petitioner is a defaulter of a huge service tax amount is legally valid, considering that the tax liability is sub judice before various authorities and tribunals, and therefore, the petitioner cannot be termed a defaulter as per Section 73(1) of the Finance Act, 1994? Petitioner's arguments: The petitioner argued that they cannot be considered a defaulter as their tax liability is under dispute and has not been finally determined. They relied on the fact that a show cause notice was issued, but the proceedings were subsequently dropped by an Order-In-Original, and appeals against that order are pending. Therefore, the cancellation based on being a 'defaulter' is incorrect. Respondents' arguments: The respondents contended that the tender notification contained a clause reserving the right to cancel, postpone, or reject tenders, and the cancellation was an exercise of this right. They submitted that the cancellation was valid in view of this condition.